COMPARATIVE GUIDE
3 November 2025

ESG Comparative Guide

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ESG Comparative Guide for the jurisdiction of Luxembourg, check out our comparative guides section to compare across multiple countries
Luxembourg Corporate/Commercial Law
Isabel Høg-Jensen,Elzbieta Tumko,Alessandro Morini
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1 Legal and enforcement framework

1.1 What regulatory regimes and codes of practice primarily govern environmental, social and governance (ESG) regulation and implementation in your jurisdiction?

The ESG regime in Luxembourg is governed by:

  • EU regulations and legislation;
  • national legislation; and
  • regulatory guidance.

EU regulations include, among others:

Luxembourg laws and recommendations include, among others:

  • the Law of 23 July 2016 on the publication of non-financial information, which transposed the EU Non-financial Reporting Directive (2014/95) (NFRD). The national transposition of the Corporate Sustainability Reporting Directive (CSRD) (2024/3005), which will replace the NFRD, is currently ongoing;
  • the Law of 6 February 2025 on green bonds;
  • the Grand-Ducal Regulation of 27 July 2022 amending the Grand Ducal Regulation of 30 May 2018 in order to transpose Delegated Directive 2021/1269 amending Delegated Directive 2017/593 regarding the integration of sustainability factors into the product governance obligations of MiFID II; and
  • all press releases, circulars and other recommendations on sustainable finance issued by the Commission de Surveillance du Secteur Financier (CSSF), including:
    • CSSF Circular 21/773 on the management of climate-related and environmental risks for all credit institutions designated as less significant institutions under the Single Supervisory Mechanism and all branches of non-EU credit institutions; and
    • CSSF Circular 24/863 on guidelines on funds' names using ESG or sustainability-related terms.

Codes of conduct include:

  • Principle XI of the Revised Association of the Luxembourg Fund Industry (ALFI) Code of Conduct 2022;
  • the X Principles of Corporate Governance of the Luxembourg Stock Exchange; and
  • CSSF FAQs on the SFDR.

1.2 Is the ESG framework in your jurisdiction primarily based on hard (mandatory) law and regulation or soft (eg, 'comply or explain') codes of governance?

While the ESG framework in Luxembourg is made up of both hard and soft law, it is primarily based on mandatory EU regulations and directives, in addition to Luxembourg laws that implement these directives.

1.3 Which bodies are responsible for implementing and enforcing the rules and codes that make up the ESG framework? What powers do they have?

In relation to national law, the Law of 25 February 2022 appoints the CSSF and the Office of the Insurance Commissioner (CAA) as the national authorities responsible for ensuring the application of the SFDR and the Taxonomy Regulation. This law grants the CSSF and the CAA supervisory and investigative powers over financial market participants and financial advisers that are subject to their supervision, in order to ensure that they are applying the law correctly.

These supervisory and investigative powers include:

  • the right to access, receive or take a copy of documents or other data, whatever form it may take; and
  • the right to carry out on-site inspections of the people or entities under their supervision.

These bodies also have administrative sanctioning powers, which may be exercised upon discovering an act of non-compliance by entities within their scope. Examples of these powers include:

  • the right to publish a public statement disclosing the identity of those responsible for the violation along with the nature of that violation;
  • the ability to issue an administrative fine of between €250 and €250,000; and
  • the power to temporarily prohibit a person from exercising their managerial functions.

1.4 What is the regulators' general approach to ESG and the enforcement of the ESG framework in your jurisdiction?

As one of Europe's leading financial centres, Luxembourg already plays an important role in mobilising private and public capital in order to help governments and investors around the world to mitigate climate change. In 2024, the CSSF strengthened its focus on sustainable finance against a backdrop of increased regulation, heightened investor demand and climate goals. Key actions included:

  • publishing supervisory priorities on transparency, ESG risk integration and sustainability preferences under MiFID II;
  • monitoring compliance with SFDR disclosures at the entity and product level and the application of the implementing technical standards on prudential disclosures on ESG risks, ensuring that banks communicate in a transparent manner on their climate-related financial risks;
  • conducting on-site inspections concerning climate-related and environmental risk management at credit institutions;
  • issuing warnings and guidance to combat greenwashing, including updates to fund naming rules and investor education via Lëtzfin (an educational platform that helps investors to identify and avoid bad practices); and
  • releasing sustainability reports to assess how issuers prepared for climate-related risks and aligned their strategies with their long-term sustainability objectives.

The CSSF remains committed to maintaining sustainable finance as one of its core supervisory priorities while adapting to the development of the European regulatory framework. It will also prioritise financial education to help investors grasp the risk and opportunities linked with sustainability.

1.5 What private sector initiatives have been launched in your jurisdiction to complement the ESG framework?

The three main private sector initiatives which exist in Luxembourg to complement the ESG framework are:

  • the Luxembourg Sustainable Finance Initiative (LSFI);
  • the Luxembourg Finance Labelling Agency (LuxFLAG); and
  • the ALFI framework – in particular, its Code of Conduct.

LSFI: The LSFI is a not-for-profit association that designs and implements the Sustainable Finance Strategy for the Luxembourg financial centre. The LSFI was founded in 2020 with the objective of raising awareness and promoting and helping to develop sustainable finance initiatives in Luxembourg.

Following the Luxembourg government's Coalition Agreement 2023–2028, the LSFI has defined its strategy for the next five years. The Strategy 2030 outlines a vision for how the LSFI will drive progress on sustainable finance in Luxembourg and beyond, updating its missions and scope

LSFI will work around three pillars:

  • Building expertise: This pillar focuses on:
    • enhancing understanding of sustainable finance topics; and
    • providing coaching to financial institutions.
  • Unlocking potential and mobilising the financial sector: This pillar emphasises collaboration and innovation by creating opportunities for public and private organisations to work together facilitating the development of new sustainable finance solutions and innovation.
  • Measuring and communicating progress: This pillar reflects the importance of data to enable Luxembourg to measure progress towards sustainability.

LuxFLAG: LuxFLAG is an independent non-profit association that was founded in Luxembourg in 2006. The organisation has launched a variety of labels which allow investors to identify sustainable investment products. These include the Environment Label, which reassures investors that the relevant investment product invests the majority of its assets in environmental-related sectors in a responsible manner. The association also awards labels for other sustainability matters, such as the Climate Finance and Green Bond Labels. As of Q4 2024, LuxFLAG had labelled 261 financial products with €133.88 billion of assets under management.

ALFI: The ALFI Code of Conduct was originally published in September 2009 and was updated in 2013. It establishes good governance practices for funds and management companies. In order to remain relevant and adapt to the current environment of fund regulation and governance, the code was updated again in 2022 to incorporate ESG matters.

2 Scope of application

2.1 Which entities are captured by the rules and codes that make up the principal elements of the ESG framework in your jurisdiction?

By way of direct application of the EU regulations affecting ESG – including, for instance, the EU Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation – the ESG framework in Luxembourg applies to:

  • financial market participants, including investment firms which provide portfolio management;
  • alternative investment fund managers (AIFMs);
  • managers of qualifying venture capital funds;
  • managers of qualifying social entrepreneurship funds;
  • management companies of undertakings for collective investment in transferable securities (UCITS);
  • credit institutions which provide portfolio management; and
  • financial advisers – including credit institutions, investment firms, AIFMs and UCITS management companies – which provide investment advice.

The Law of 23 July 2016 on the publication of non-financial information, which sets out the principal elements of the ESG framework in Luxembourg, applies only to large public interest entities – notably those which:

  • are organised as:
    • a limited company;
    • a European company;
    • a limited partnership with shares; or
    • a limited liability company; and
  • exceed:
    • 500 employees;
    • total assets of €20 million; and/or
    • a net turnover of €40 million.

A draft law (8370) is currently pending and the Non-financial Reporting Directive will be replaced once this draft law is adopted. In addition, soft national law in the form of Commission de Surveillance du Secteur Financier Circular 21/773 on the Management of Climate-Related and Environmental Risks sets out recommendations for:

  • all credit institutions designated as 'less significant institutions' under the Single Supervisory Mechanism; and
  • all branches of non-EU credit institutions.

2.2 How are entities in your jurisdiction that are not subject to specific rules or codes implementing ESG?

Entities that are not subject to specific rules or codes implementing ESG may refer to soft Luxembourg 'law' to implement ESG. The landscape includes several key voluntary frameworks:

  • The ALFI Code of Conduct covers all funds, whether UCITS or AIFs and AIFMs. The Code of Conduct:
    • is principles based rather than rules based; and
    • foresees, in its Principal Recommendations, the integration, as appropriate, of sustainability standards and objectives – including ESG criteria – in a fund's business model and operations generally.
  • Entities that do not fall within the scope of the code may decide to abide by these principles on a voluntary basis.
  • The Luxembourg Stock Exchange has published the X Principles of Corporate Governance as a complement to domestic legislation. The X Principles have been drawn up for limited companies with a single-tier governance structure (ie, a board of directors), which is the form most adopted by companies in Luxembourg. However, they are also intended to apply to other forms of companies. The X Principles include corporate social responsibility requirements.

A significant development in 2025 is ESG 1000, a new sustainability certification launched to help businesses of all sizes simplify their sustainability reporting. Developed by the International Group for Sustainable Finance, a Luxembourg-based independent standards body, ESG 1000 provides a structured approach for companies to align with global sustainability principles. By integrating major international standards – such as the Global Reporting Initiative, the European Sustainability Reporting Standards, ISO 26000 and the UN Global Compact – the certification creates a common framework to measure and report non-financial performance.

2.3 What are the principal ESG issues in your jurisdiction that are either part of the ESG framework or part of the implementation of ESG?

The principal ESG implementation challenges in Luxembourg have evolved significantly since the initial SFDR and Taxonomy Regulation rollout. The Commission de Surveillance du Secteur Financier imposed its first SFDR sanction in October 2024, fining a fund manager for breaches in internal governance regarding Article 8 fund classification. This is unsurprising: Article 8 SFDR funds are more vulnerable to greenwashing risks since they are subject to less strict rules (as opposed to Article 9 SFDR funds).

Data quality remains the most pressing challenge:

  • 55% of companies have cited data quality and consistency issues in Corporate Sustainability Reporting Directive reporting; and
  • 45% have expressed concerns about having sufficient resources to meet requirements.

The overwhelming number of ESG rating agencies (over 100) using inconsistent methodologies creates additional complexity, as ESG ratings alone are no longer sufficient for EU regulatory compliance.

Greenwashing accusations have increased sharply, forcing regulators to respond robustly to protect investors and regain trust. Studies show that many funds classified under Articles 8 and 9 of the SFDR do not always deliver expected impact and may finance high-carbon companies.

These challenges require enhanced data management systems, clearer regulatory guidance and stronger internal governance frameworks to ensure meaningful ESG implementation rather than mere compliance.

3 Disclosure and transparency

3.1 What primary disclosure obligations relating to ESG apply in your jurisdiction?

The primary disclosure obligations relating to ESG derive from EU legislation – notably:

At the national level, the following laws apply:

  • the Law of 23 July 2016 on the disclosure of non-financial and diversity information by certain large undertakings and groups, which transposed the EU Non-Financial Reporting Directive (NFRD) (Directive 2014/95/EU)). The national transposition of the Corporate Sustainability Reporting Directive (2022/2464) that will replace NFRD is currently ongoing; and
  • the Grand Ducal Regulation of 27 July 2022 amending the Grand Ducal Regulation of 30 May 2018 in order to transpose Delegated Directive 2021/1269 on the integration of sustainability factors into the product governance obligations.

3.2 What voluntary ESG disclosures are also commonly made in your jurisdiction?

Several interest groups are active in relation to disclosures concerning environmental, carbon emissions, climate, social and governance matters. They have developed various disclosure frameworks that may be considered on a voluntary basis when disclosing ESG information. The different frameworks include:

The Commission de Surveillance du Secteur Financier (CSSF) also issues guidance in this regard, such as:

3.3 What role is played in this regard by (a) the board and (b) other corporate bodies and/or officers?

Under Luxembourg law, the board of directors has the widest management powers to act on behalf of the company, subject only to matters reserved to the shareholders' meeting. In this capacity, the board is responsible for integrating ESG considerations into the company's governance where required by law or recommended by best practice.

Until recently, ESG-related disclosure has largely been a matter of soft law. For instance, the Association of the Luxembourg Fund Industry Code of Conduct and the X Principles of Corporate Governance of the Luxembourg Stock Exchange expect boards to:

  • ensure that processes are in place to safeguard human and social rights;
  • consider ESG integration when selecting service providers;
  • encourage the inclusion of sustainability criteria in remuneration policies;
  • regularly (at least annually) obtain a dedicated report on sustainability strategy; and
  • monitor compliance with applicable sustainability-related laws and regulations relevant to the company's business.

Furthermore, boards may benefit from a more favourable legal environment pursuant to case law (Cour d'appel, 13 July 2018) extending the notion of corporate interest beyond shareholders' interests to other stakeholders and public goods, including the environment and human rights. Therefore, boards may now feel more confident in disclosing ESG-related information in line with international standards, without fear of being challenged purely on grounds of loss of financial advantage. Within this framework, directors' duties are redesigned to take account of respect for ESG values.

The landscape redesigned by Luxembourg case law will be consolidated by the prospective transposition of the CSRD, which has introduced binding sustainability reporting obligations for large companies at the EU level. The Corporate Sustainability Due Diligence Directive will impose further duties relating to human rights and environmental due diligence.

Other corporate bodies and officers – such as management committees (for public limited liability companies), risk managers, compliance officers or even dedicated ESG officers – may support boards by:

  • implementing policies;
  • monitoring data; and
  • preparing the requisite disclosures.

In the investment funds industry, Luxembourg-domiciled funds and management companies appear to have started establishing dedicated ESG committees or appointing sustainability officers, reflecting regulatory expectations that ESG oversight will become embedded in corporate governance.

3.4 What best practices should be considered in relation to ESG reporting and disclosure?

In recent years, the ESG regulations have become more extensive in volume and stricter in their requirements. The EU ESG legislative framework is now more stringent and has been expanded to encompass an increasing number of industries and entities.

The following best practices should be considered:

  • All regulatory requirements should be observed – for instance, adherence to the applicable standards of ESG regulations using the prescribed mandatory templates – and all application guidance respected (including CSSF Circular 24/863 implementing the ESMA guidelines on fund naming practices, effective as November 2024)).
  • Data quality and accuracy are crucial and the applied methodology should be explained. Where estimates are used:
    • clarify the benchmarks and the sector data used; and
    • ensure that all data points have relevant sources and evidence.
  • It is also key to ensure consistency across different disclosure in periodic ESG reporting, to provide a clear picture of the company's targets, efforts, achievements and challenges.
  • Transparency remains vital to avoid greenwashing by disclosing only qualitative commitments that are not supported by data-driven results.
  • On the governance side, the ESG reporting process should be embedded within the organisation by involving relevant departments (eg, compliance) to review and challenge the disclosures.
  • Automated tools should be integrated into reporting to reduce the probability of human error.
  • Disclosures should be certified by a third-party reviewer (external verification) to:
    • enhance the ESG data collection process;
    • verify the quality of the data; and
    • engender trust among shareholders and investors.

4 Strategy and governance

4.1 How is ESG strategy typically designed and implemented in companies in your jurisdiction?

There is growing recognition of the importance of ESG factors in the investment decision-making process. As a result, investors are increasingly favouring fund and asset management companies that can demonstrate a commitment to sustainability and responsible business practices.

In general, companies follow the key steps below to integrate ESG strategy into their activities and decisions:

  • Consider the applicable ESG regulations and stakeholder expectations through materiality assessment, embedding sustainability goals into the overall strategy.
  • Integrate identified measures into governance, actions plans, internal processes, risk management and oversight, assigning ESG responsibilities across the company.
  • Define, track and review:
    • ESG key performance indicators (KPIs); and
    • ESG-related risks and opportunities.
  • Disclose and communicate ESG performance in annual reports and financial product documentation.

The design, implementation and communication of a sound and transparent ESG strategy are still crucial in order for a fund to attract and retain clients.

4.2 What role is played in this regard by (a) the board and (b) other corporate bodies and/or officers?

As in other areas, the board of directors plays a crucial role in steering ESG integration. In conformity with the board's role under the Law of 1915 on commercial companies, as amended, its responsibilities include:

  • setting the company's overall strategic direction, ensuring that ESG is embedded in business practices;
  • adopting ESG policies, identifying related risks and opportunities and overseeing implementation; and
  • monitoring compliance with applicable sustainability standards and disclosure obligations.

To execute an ESG strategy effectively, boards are expected to:

  • identify and coordinate key departments, ensuring that each understands its role in implementing the ESG strategy and has adequate resources;
  • establish an internal ESG or committee – typically composed of managers from finance, HR, operations, legal and risk – with responsibility for setting ESG goals aligned with the company's strategy;
  • designate key personnel to prepare and upgrade sustainability data and non-financial information; and
  • oversee reporting so that sustainability disclosures meet the relevant applicable ESG requirements – going forward, such requirements will soon be those provided under the European Sustainability Reporting Standards pursuant to the Corporate Sustainability Reporting Directive (CSRD), while also considering recognised external frameworks such as the Global Reporting Initiative.

Both board-enhanced committees and expert employees – in particular, those in compliance and risk management functions – increasingly support boards in policy definition and implementation.

4.3 What mechanisms are typically utilised to monitor the implementation of ESG strategy in your jurisdiction?

In relation to the monitoring of ESG strategies, stakeholders increasingly expect companies to demonstrate their commitment to sustainable practices. International sustainability standards:

  • provide a framework for companies to manage and report on their ESG performance; and
  • help to ensure consistency and comparability across different companies and sectors.

These standards usually cover a range of topics, including:

  • climate and broader environmental impact;
  • labour practices;
  • human rights;
  • governance structure; and
  • supply chain management.

These standards provide a common language for sustainability reporting, enabling companies to report on their ESG performance in a consistent and comparable manner. This helps investors and stakeholders to evaluate a company's sustainability performance and compare it with other companies. Standards also improve the quality of ESG reporting by providing clear guidance on how to measure, manage and report on ESG issues; this helps to ensure that sustainability reports are accurate, comprehensive and transparent, while in turn building trust and enhancing the reputation of the reporting company.

Many companies set up ESG dedicated committees or teams within the organisation to:

  • oversee strategy implementation and track progress;
  • define and monitor ESG-related KPIs;
  • carry out topic mapping; and
  • prepare stakeholder surveys to gather feedback.

The Commission de Surveillance du Secteur Financier also conducts continuous checks and on-site inspections to ensure that companies which fall within the scope of the SFRD comply with the regulatory requirements.

4.4 What role is played in this regard by (a) the board and (b) other corporate bodies and/or officers?

Pending the transposition of the CSRD, the board and several corporate bodies and officers play an important role in implementing ESG strategies. In particular:

  • audit committees oversee the internal control and assurance of ESG disclosures, especially as sustainability reporting will be subject to external assurance requirements;
  • the risk, compliance and internal audit functions monitor adherence to ESG regulations, standards and internal policies; and
  • dedicated ESG officers or sustainability committees:
    • coordinate the day-to-day implementation of the strategy;
    • gather data across departments; and
    • prepare draft reports for board review.

4.5 How is executive compensation typically aligned with ESG strategy in your jurisdiction?

Article 5 of the SFDR requires financial market participants to disclose how their remuneration policies are consistent with the integration of sustainability risks.

However, market practices for this requirement could vary. For example:

  • The approach to compensation could:
    • focus on risk and internal control matters that discourage excessive risk taking; and
    • include sustainability risks by nature; or
  • Sustainability-related KPIs (ie, climate goals) could be set to ensure that decisions are taken in line with the relevant sustainability risk considerations related to investment strategies.

4.6 What best practices should be considered in relation to the design and implementation of ESG strategy?

The integration of ESG strategies into business practices is increasingly crucial in meeting the demands of consumers, investors and regulators for greater transparency and responsibility. To this end, companies should adopt certain ESG-related best practices. In view of upcoming regulations, these include the incorporation of ESG factors into the company's core business strategy. Moreover, companies should engage with stakeholders such as investors, employees, customers and communities to understand their ESG concerns and priorities. Regular communication, collaboration and feedback mechanisms should be employed to ensure that ESG strategies align with stakeholder expectations.

Companies should also prioritise transparency and disclosure in ESG reporting:

  • providing clear and consistent information about their ESG performance and impacts; and
  • aligning with mandatory regulatory requirements such as:
    • the SFDR;
    • the Second Markets in Financial Instruments Directive;
    • the Taxonomy Regulation; and
    • the Non-financial Reporting Directive/CSRD.

This can involve using internationally recognised standards and frameworks – such as the Global Reporting Initiative, UN PRI or IFRS S1/S2 (previously Task Force on Climate-related Financial Disclosures) – to ensure credibility and comparability.

By applying best practices, companies can:

  • manage ESG risks and opportunities effectively;
  • enhance their reputation;
  • attract and retain talent; and
  • create long-term value for stakeholders.

Embedding ESG oversight at board level is key in order to ensure that the ESG strategy is addressed cross-functionally.

As the world continues to face complex ESG challenges, companies that adopt a proactive and strategic approach will be better positioned to succeed in the future. Automation and AI developments should be harnessed to enhance operational efficiency through ESG and mitigate related risks.

5 Financing

5.1 What is the general approach of lenders towards ESG in your jurisdiction? What internal and external information regarding a prospective borrower will they typically consider in this regard?

ESG lending activity driven by EU and national legislation and incentives has increased significantly in recent years. In particular, Luxembourg lenders are influenced by the following:

  • Regulatory supervision: Authorities such as the European Central Bank, the European Banking Authority and the Commission de Surveillance du Secteur Financier have tightened up their supervision of ESG matters. Lenders are expected to integrate ESG risks into their business strategies, governance and risk management frameworks.
  • International commitments: Banks are participating in international climate initiatives such as:
    • the Glasgow Financial Alliance for Net Zero;
    • the Partnership for Carbon Accounts; and
    • the Science-Based Targets Initiative.
  • Industry strategy: With sustainable finance a strategic goal set for the finance industry, lenders are taking a proactive approach to incorporating ESG considerations into their lending policies and product governance requirements when designing and distributing financial instruments.

Luxembourg is actively positioning itself as a hub for sustainable finance. In addition, there is growing appetite among local lenders for ESG-linked financing – particularly loans tied to carbon-emission reductions and energy-efficiency improvements.

A prospective borrower is expected to provide the lender with information evidencing the 'sustainable' purpose of a project. For example, borrowers may need demonstrate specific energy efficiency performance. ESG ratings and labels (eg, issued by the Luxembourg Finance Labelling Agency) are also of significance.

5.2 Are bonds/loans that are marketed as green bonds/loans, social bonds/loans, sustainability bonds/loans or similar a feature of the markets in your jurisdiction?

The green, social, sustainability and sustainability-linked bond market has grown significantly in Luxembourg in recent years.

In 2016, the Luxembourg Stock Exchange launched the world's first and now leading platform dedicated exclusively to green bonds: the Luxembourg Green Exchange (LGX). Since then, the LGX has expanded to include social, sustainable and sustainability-linked bonds. The main objective of the LGX is to reorient capital flows towards sustainable projects.

Luxembourg has also taken pioneering steps at the sovereign level. In 2020, Luxembourg became the first European country to launch a sustainability bond framework, designed to boost financing for sustainable projects in areas such as:

  • the construction of green buildings;
  • the energy transition;
  • access to essential services, such as health, education and social inclusion; and
  • job creation.

Because of this framework, Luxembourg issued the first European sovereign sustainability bond listed on the LGX.

The market has continued to evolve with the introduction of the European Green Bond Standard in December 2024. The first issuer – an Italian utility company – chose to dual-list its bond on the LGX.

In 2025, one of Luxembourg's largest state-owned banks issued its inaugural €500 million senior preferred green bond under a newly launched Green Bond Framework. The bond, listed on the LGX, is dedicated to financing environmentally sustainable projects.

These initiatives have positioned Luxembourg as a leading hub for sustainable bond issuance in Europe.

5.3 What key developments have taken place in the structuring of these instruments in your jurisdiction?

The key principles in relation to the structuring of instruments have been developed by international market associations,

To support the capital markets, the International Capital Market Association has published:

To support sustainable lending practices, the Loan Market Association has published:

Since December 2024:

  • the European Green Bond Standard has become applicable, providing a voluntary but legally binding framework for issuing bonds labelled as European green bonds; and
  • the EU Listing Act has mandated ESG-advertised securities to disclose ESG factors, enhancing transparency and investor confidence.

5.4 What best practices should be considered in relation to ESG in the financing context?

ESG-related challenges have made it easier to engage in 'greenwashing' – providing false or misleading ESG-related information on a company or financial instruments. This remains a concern for lenders and investors. To address this, several best practices has emerged, including:

  • the use of ESG ratings and third-party assessments;
  • the structuring of key performance indicators; and
  • alignment with national and EU regulations.

The LGX also supports ESG reporting and market transparency by providing access to external reviews and post-issuance reports through its LGX DataHub.

6 ESG activism

6.1 What role do institutional investors and other activist shareholders play in shaping ESG in your jurisdiction?

Shareholder activism still does not appear to be a widespread practice in Luxembourg. There is a structural explanation for this: global groups use Luxembourg mainly as a corporate and investment hub. Thus, listed and unlisted companies, as well as investment funds and other vehicles, are generally held by a limited number of shareholders (sometimes just one), which often directly or indirectly hold investments and participations mainly in non-Luxembourg, or even non-EU, companies.

As a result, through their Luxembourg vehicles, activist shareholders may influence the decision-making of companies established worldwide, rather than primarily Luxembourg-established companies. Consequently, while Luxembourg law provides the legal instruments to exercise shareholder influence, the main arena of ESG-driven shareholder activism is usually outside Luxembourg.

Accordingly, while traditional shareholder activism remains limited, EU-level regulatory activism is progressively driving ESG integration by Luxembourg-based investment structures and management companies. Market participants are in the process of learning and adapting to these frameworks, which over time will make ESG a more central component of investor expectations and corporate governance in Luxembourg.

6.2 How do activist shareholders typically seek to exert influence on corporations in your jurisdiction in relation to ESG?

Activist shareholders in Luxembourg generally seek to influence boards through dialogue rather than large-scale campaigns. The main tools available to them include the following:

  • Shareholders can monitor disclosures on the company's implementation of ESG regulation and policies, in particular ahead of the annual general meeting. In view of the prospective transposition of the Corporate Sustainability Reporting Directive (CSRD), many companies are working on their governance to be ready to include ESG-related information in their management reports.
  • Shareholders can request the addition of ESG-related items to the agendas for general meetings and propose the wording of related resolutions or request the postponement of a general meeting for up to four weeks (rights available to shareholders holding at least 5% and 10% of the share capital, respectively).
  • Shareholders can participate and vote at general meetings, including annual general meetings, where the shareholders decide whether to grant a discharge to the management.
  • Shareholders can address questions to managers at general meetings (within the limits of the agenda) or outside them, with the possibility to petition the judiciary for the appointment of an expert if management does not respond (reserved to shareholders holding at least 10% of the share capital).
  • Shareholders can influence remuneration policies – albeit that their vote is generally advisory unless the articles of association provide otherwise.
  • Shareholders holding 10% of the share capital or voting rights may bring a lawsuit against directors on behalf of the company.
  • In more extreme cases, dissatisfied shareholders may:
    • sue board members for breach of their legal or fiduciary duties in relation to ESG compliance or internal policies; or
    • ultimately divest.

6.3 Which areas of ESG are shareholders currently focused on?

Given the limited extent of shareholder activism in Luxembourg, it is not easy to identify a dominant set of ESG priorities. In accordance with global trends, climate and environment remain at the forefront. The ongoing participation of major global investment managers – including some with Luxembourg operations – in initiatives such as Climate Action 100+ underlines that decarbonisation and alignment with climate targets are central concerns.

Diversity and inclusion are also gaining importance. Some Luxembourg fund market participants in the past had signalled that they may adopt voting practices at general meetings to push companies towards stronger gender diversity policies – a trend reinforced by the EU Gender Balance Directive, which must be implemented by 2026.

Human rights and labour conditions are also moving higher up the agenda, not least due to the forthcoming entry into force of the Corporate Sustainability Due Diligence Directive (CSDDD), under which companies and investors must formally address global human rights and supply-chain due diligence more proactively.

In addition to climate, diversity and human rights, recent investor practice reveals a growing focus on:

  • nature and biodiversity;
  • plastic/waste/circular economy themes; and
  • linking ESG metrics to executive pay.

For example, Pictet's 2024 Responsible Investment Report highlights engagements on:

  • ecosystem change;
  • pollution; and
  • board-pay alignment.

Luxembourg's fund industry is also strengthening ESG oversight at the board and governance level: in PWC's 2024 Luxembourg Fund Governance Survey, ESG was cited as a key new area of expertise added to boards and ranked among the top priorities for the coming years.

Beyond individual initiatives, the Luxembourg regulatory environment continues to evolve in step with EU law. Companies may also find synergies in working with non-governmental organisations, which – especially in the case of increasingly influential global non-governmental organisations – can serve as a catalyst for ESG issues to reach shareholders and institutional investors. In practice, Luxembourg-domiciled investment funds act as conduits of global investor priorities, so the ESG areas of focus largely mirror broader international trends rather than being driven by local activism.

6.4 Have there been any high-profile instances of ESG activism in recent years?

Unlike in some other EU jurisdictions, there have been no high-profile shareholder campaigns in Luxembourg centred on ESG issues. The most visible cases of shareholder activism in Luxembourg have historically taken place in the context of hostile takeovers, such as Arcelor/Mittal (2006) and Braas Monier/Standard Industries (2016), and were motivated primarily by financial and corporate considerations rather than sustainability.

In the ESG space, activism remains limited at the domestic company level, largely due to the concentrated ownership structures typical of Luxembourg entities. However, Luxembourg-domiciled investment funds and management companies are increasingly engaging in ESG initiatives abroad. For example, many participate in global engagement coalitions such as Climate Action 100+ and publish annual stewardship and voting reports showing their influence on ESG issues in non-Luxembourg investee companies.

As a result, while Luxembourg itself has not seen headline-grabbing ESG campaigns, its fund industry acts as a conduit for cross-border ESG activism; and regulatory developments such as the CSRD and CSDDD are expected to gradually bring ESG considerations closer to the heart of corporate governance in Luxembourg.

6.5 Is ESG activism increasing or decreasing in your jurisdiction? How and why?

Shareholder activism remains limited in Luxembourg, making trends harder to measure than in markets with dispersed ownership. Nevertheless, ESG-related engagement is gradually increasing, driven not so much by local campaigns as by EU regulation and global investor initiatives.

The progressive rollout of EU sustainability legislation is pushing investors to demand greater transparency and accountability from the companies they finance. Luxembourg-domiciled asset managers and funds participating in global coalitions may use these frameworks to engage with management teams and promote alignment with ESG targets. The fact that, as reported by a recent Sustainable Finance Report issued by PwC (providing a country picture based on a snapshot up to FY 2022), certain funds are already applying ESG-specific strategies may reflect pressure from activist shareholders– themselves encouraged by the need to align with a rapidly changing regulatory environment.

Such activism typically takes the form of dialogue and engagement with boards rather than public campaigns. Over time, this may translate into governance adjustments, such as:

  • establishing ESG or sustainability committees; and
  • integrating ESG metrics into remuneration policies.

Given the structure of the Luxembourg market, where many entities are holdings or investment vehicles, the practical impact of this activism is often felt abroad, at the level of subsidiaries and affiliates, rather than within Luxembourg-based operating companies.

7 Other stakeholders and rights holders

7.1 What role do stakeholders or rights holders (eg, employees, pensioners, creditors, customers, suppliers, and Indigenous communities) play in shaping ESG in your jurisdiction? What influence can they exert on a company?

While Luxembourg company law does not establish specific legal mechanisms empowering stakeholders to directly influence corporate ESG decisions, the evolving regulatory landscape is creating new avenues for stakeholder engagement.

The Luxembourg Stock Exchange X Principles require boards to:

  • "consider sustainability aspects and ... take into account the interests of all stakeholders in their deliberations"; and
  • "deploy an appropriate sustainability policy" with transparent reporting.

While this establishes an obligation for companies to consider stakeholder interests, it does not grant stakeholders direct governance rights.

Customers rather than regulators are in reality the most important ESG stakeholders and asset managers exert significant influence on the ESG efforts of companies. In 2024, ESG funds in Luxembourg experienced a substantial 12.3% increase in assets under management, reaching €3.25 trillion by June 2024, representing 73.3% of all undertakings for collective investment in transferable securities assets under management in Luxembourg. Luxembourg remains the largest European hub for sustainable investment funds, hosting over one-third (34%) of sustainable funds' net assets; while Europe continues to lead sustainable finance, holding 85% of global sustainable funds' net assets, reaching €2.2 trillion.

8 Trends and predictions

8.1 How would you describe the current ESG landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

In recent years, Luxembourg has followed an active ESG and sustainability policy both at governmental level and in terms of its fiscal policy. As such, Luxembourg aims to implement, in due course, all ongoing EU rules relating to ESG.

In addition, at the national level, Luxembourg tabled Draft Law 7433 on sustainable finance, which would amend the Law of 17 December 2010 on undertakings for collective investment ('UCI Law') adopted by the Luxembourg government on 25 April 2019. The draft law would introduce a more favourable tax regime for sustainable finance. Thus, while under Article 172 of the UCI Law, the annual subscription tax rate payable by UCIs is 0.05%, a reduced rate of 0.01% would apply to UCIs oriented towards sustainable finance.

At the EU level, the Omnibus Simplification Package was proposed by the European Commission on 26 February 2025 as a single legislative instrument intended to amend:

  • the Corporate Sustainability Reporting Directive (CSRD);
  • the Corporate Sustainability Due Diligence Directive;
  • the EU Taxonomy Regulation; and
  • the Carbon Border Adjustment Mechanism Regulation.

The initiative aims to harmonise sustainability reporting obligations across the European Union and to alleviate administrative burdens on undertakings.

A separate 'stop the clock' proposal will also postpone by two years the reporting requirements for companies currently within the scope of the CSRD, which were scheduled to report as of 2026 or 2027. This is to give time to the co‑legislators to agree to the European Commission's proposed substantive changes.

Furthermore, companies that are subject to the CSRD will have to report according to the European Sustainability Reporting Standards.

A number of draft laws have recently been introduced reflecting the country's ongoing alignment with evolving European regulatory frameworks in the areas of sustainability, corporate transparency and access to information, including:

9 Tips and traps

9.1 What are your top tips for effective ESG implementation in your jurisdiction and what potential sticking points would you highlight?

Since the implementation of the Sustainable Finance Disclosure Regulation (SFDR) (including Commission Delegated Regulation (EU) 2022/1288) and the Taxonomy Regulation, numerous guidelines both at EU level and from the Commission de Surveillance du Secteur Financier have been issued and welcomed by market players. Data has also improved over time and a certain SFDR reporting practice has also been established.

However, it is still vital for financial market participants to:

  • adhere to the applicable standards of the ESG regulations;
  • maintain data quality and accuracy; and
  • implement strong governance embedding the ESG reporting process within their organisation.

A potential revision of SFDR Level 1 could also potentially see the light in the future, given that a consultation has already taken place at the EU level. If this were to be revised, a labelling model (bearing in mind that the SFDR was already used in that way in the past by financial market participants) would be welcome. The updated regulation should provide more clarity to investors differentiating clearly the ESG strategies of the financial products, aligning more with EU Taxonomy and decreasing greenwashing cases.

The regulatory risk linked to the ESG regulations should still be appropriately mitigated by financial market participants – not least by seeking legal advice from a law firm with proven expertise in ESG and sustainable finance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Authors
Photo of Isabel Høg-Jensen
Isabel Høg-Jensen
Photo of Elzbieta Tumko
Elzbieta Tumko
Photo of Mikail Ceylan
Mikail Ceylan
Photo of Alessandro Morini
Alessandro Morini
Photo of Anne Becker
Anne Becker
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